Lee expects a post-midterm relief rally

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 14:20

   it may end up being a company like SpaceX or Apple as the long-term winner. Just going back to our previous episode, when we had you on in July, your prediction was that the S&P would hit 8,000 by the end of the year, but not before we saw a significant correction in the fall. And your expectation was that stocks would come back after that correction. Seems like maybe we could call this the correction. Do you feel that your prediction is tracking? Do you still think that we'll hit 8,000? That'll be around 5.5% higher than where we are now.

2. 14:53

   Well, one thing I'd point out is I know when I was last on your show and I mentioned that possibility of a correction many people were very dismissive because the market had a lot of momentum at the time and i think that's what we have to be wary of is that when the market's strong people can never see a big correction ahead i do think we're now in this correction that i was mentioning because like memory is down almost 50 and the ai trades down more than 20 and as you out, Nasdaq's down 10. But I think we're at the end of that sell-off. I think the rally into year-end will be even stronger. I think we could be at 8,200, maybe even 8,400 by the end of the year. So I think we're going to rally above what I thought originally.

3. 15:38

   All right, just before we wrap here. midterm results will be in when this airs. You mentioned that there might be concerns that if we have a Democratic sweep, then that might mean a wave of anti-AI or anti-data center legislation. Talk a little bit more about that, but also what are your expectations for after the midterms? Because your prediction assumes that investors will actually feel pretty good coming out of this election? I'm going to lean on that prediction markets and the polls show a Democratic sweep. So let's say that that is the outcome. That's actually very favorable for markets. In the instances where the Republicans lose and the Democrats take the Senate after midterm elections, we've actually seen some of the biggest stock market rallies. For instance, in 1954, the S&P rallied 13% into the end of the year and 33% over the next 12 months.

4. 16:39

   But 100% of the time, markets have rallied after midterms over the next 12 months. So I think markets are going to be in relief mode. The reason I think Democrats will support data centers subsequently is, one, then the big tech companies are going to court Democratic senators and House and governors to really make data centers good for a community and for the state economics. And I think they're going to shift into supporting that outcome. So I think AI will grow, but it's because the tech industry basically is courting the Democratic Party, which probably we should all properly expect to be taking over the Senate and the House.

5. 17:23

   Tom Lee is co-founder, managing partner, and head of research at Fundstripe Global Advisors. Tom, we appreciate your time.